69 % of the new CEOs were promoted 90 % 84 % CEO Transitions. from within the company. vs. in 2016 and in 2015

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1 CEO Transitions Each year, Spencer Stuart tracks CEO transitions among S&P 500 companies. These transitions can be part of a planned succession or can arise unexpectedly, the result of company performance or personal issues. In addition to cataloging the reasons for CEO departures, based on company reporting, we also examine information about the successors, including whether or not they are internal candidates and whether they have been appointed chairman of the board in addition to CEO. Our analysis revealed a small uptick in the number of CEO transitions among S&P 500 companies. In addition, we saw a significant decline in the number of internally promoted CEOs. Sixty-nine percent of the new CEOs were promoted from within the company, compared with 90% in 2016 and 84% in % of the new CEOs were promoted from within the company 90 % 84 % vs. in 2016 and in 2015 ceo transitions 1

2 CEO transition overview Fifty-nine S&P 500 companies installed a new chief executive in, the highest number of transitions in the last 10 years. Since 2007, when 58 companies named new CEOs, the number of transitions generally declined before hitting a low of 37 in S&P 500 CEO Transitions Almost half of the CEO transitions occurred in companies ranked in the top 200 in revenue. Percentage of Transitions by S&P 500 Company Range 20 % 29 % 19 % 17 % 15 % ceo transitions 2

3 Why do CEOs leave? The vast majority 73% of CEO transitions were attributed in company reports to the former CEO s decision to retire or step down. This represents a decrease from 2016, when 88% of transitions were driven by CEOs retiring or stepping down. In, 8% of CEOs left for health reasons and 15% resigned under pressure, versus 9% in Reasons for CEO Transitions 73 % 15 % 8 % 3 % Former CEO retired or stepped down Former CEO Health reasons Company merger resigned under pressure CEO profiles 54 The average age of incoming CEOs is 54, just one year older than the average in 2016 (53). The average age of the outgoing CEOs is 60. Seven of the new CEOs, 12%, are women, compared with four (7%) in % Percentage of new female CEOs Average age of incoming CEOs 12 ceo transitions 3

4 External vs. internal candidates Sixty-nine percent (41) of the new CEOs were promoted from within the company, the lowest rate in a decade. In 2016, 90% of new CEOs were internal successors. All but nine of the internal CEO promotions resulted from a planned succession. CEO Successors: Internal vs. External Placements % 10 % 16 % 19 % 25% 27 % 22 % 23 % 28% 19 % 21 % 69% 90 % 84 % 81 % 75% 73 % 78 % 77 % 72% 81 % 79 % Internal External 0% 50% 100% We further break down new CEO backgrounds into five categories: internally promoted CEOs; externally recruited CEOs; former company executives; board directors who take on the role of CEO; and insideroutsiders who were recruited from outside the company and promoted into the CEO role within 18 months. An analysis of three four-year periods since 2006 confirm that S&P 500 companies are increasingly likely to promote CEOs from within rather than hire from outside; 80% of new CEOs named between 2014 and were promoted from within. New CEO Backgrounds 72% 2% 4% 4% 18% 68% 4% 3% 7% 18% 78% 2% 1% 5% 14% Internal Insider-Outsider Former Executive From Board External (218 companies) (182 companies) (220 companies) Note: Percentages are rounded up ceo transitions 4

5 Split vs. shared chairman and CEO roles Only four of the new CEOs, 7%, were also named chair of the board, the same as in Fifty-one percent of the outgoing CEOs stayed on to serve as board chair, compared with 60% in Is the New CEO Also the Chair? 100% 70 % 80 % 89 % 94 % 87 % 86 % 93% 93% Split Role Combined CEO & Chair 50% 30 % 0% % of companies chose to divide the roles of chief executive and board chair 20 % % % % % % % 51 % of outgoing CEOs continued with the company in the role of board chair ceo transitions 5

6 Note: This data looks at the companies that have experienced a CEO transition, as defined by the replacement of an outgoing CEO with a permanent CEO. Data includes names of incoming and outgoing CEOs; the reason for the new appointment/departure of the former CEO; the ages of both the outgoing and incoming CEO; and whether the appointment was an internal or external one. Prior to 2010, Spencer Stuart tracked CEO turnover, defined and recorded as any change in the CEO post. As of Jan. 1, 2010, we adjusted our methodology to track CEO transitions, defined as the change from a permanent outgoing CEO to a permanent incoming CEO. Open cases of turnover, defined as cases where no permanent CEO has been appointed, or cases where interim CEOs serve less than one year, are not included in year-end transition totals. For information about copying, distributing and displaying this work, contact permissions@spencerstuart.com. ceo transitions 6